Parents buying somewhere for DD - is it a good idea

[ctownsie]

Hi, mainly looking to see if this a good idea or not as I'm clueless.
DD is 18, in her first year of med school in London - 6 year course.
My parents recently sold their London home the area went through a lot of gentrification in the time they lived there (over 50 years) so the house ended up selling for over 2 mil.
They relocated, downsized and have a lot left to play with. They've topped up their already pretty good pensions.
I have 2 kids and im an only child. DD18 and DS15.
My parents are now wanting to buy DD a flat in London that she can share with friends. They've found a 4 bed they and DD like near uni and friends, for a little over a million.
They are planning to put down a deposit of £500,000 or so, this will be all of DDs inheritance. Then she can rent the other 3 rooms for roughly £1250-£1350. My parents said they will deal with all the landlord related tasks. They are 74 and 75 so I'm not sure that's the best idea but ok.
DD says she already has 2 friends who would be able to stay there.
My parents think this is a much better alternative to DD looking for somewhere to live for the next 5 years.
AIBU to be worried this might not be the best idea? Are there any flaws they might not have considered?
They'd still have money left should DS want the same though DS hates London and would never go to London again if he would so I doubt he would need somewhere so expensive.

Echoing most everyone else: I think it is a fantastic idea to secure somewhere for your DD to live. Renting is so expensive and stressful, and that will only get worse in the coming years. I do agree that some of the details of how it would work should be reconsidered - I'm glad everyone in your family agrees that smaller/cheaper is better. Fewer flatmates to fall out with and less financial risk.

It's very kind for your parents to be wanting to take over the legal and maintenance issues (was that the idea?), but it may not be the best plan at their ages. I think it would be even better to let your daughter get to grips with that herself, while her parents and grandparents offer lots of advice from the sidelines. That does take time for her to do, but presumably the free accommodation means she won't need a part-time job. These are important skills, and ultimately it's her flat, so she should be making the decisions and sorting it out.

If she does rent to a friend (or someone she knows) bear in mind that sometimes they expect 'mates rates' - well SIL had this when she rented her spare room out. One woman was a complete and utter nightmare and was her best friend!

For me, if ever I did this, I preferred it to be someone I didn't know well or at all, at market rate but got references from.

I'm biased because I've never had inheritance or much financial help, but I don't think handing an 18 year old a 500k property will do them favours in the long run.

Obviously, you can't turn back now as your daughter and her grandparents are invested in the idea, however I think there's a lot of skills and experiences to be learnt just by living a normal student life and managing your own budget. It also allows more flexibility, and removes the stress of home ownership (and all the maintenance that comes along with it). It also gives you a better perspective on normal people's lives, rather than automatically being given the privilege of a decent, stable living situation which is something that most of DD's peers will not be experiencing for the next decade most probably.

Lucky girl. Deffo two bed outright no mortgage where she doesn't NEED an income from a lodger. But if she gets home, great. Ideally freehold with a garden and no service charges.

I've just thought, could you both be guarantors for mortgage for DD? SIL's DP's parents were that for her and her DB's purchase.

If it were me I'd go for a small house (I've got a 2/3 bed 'cottage') if affordable. Yes, it's small but no bloody freeholder to worry about.

Final comment from me (ha!) - as others have said, this all seems very rushed. Do not, I repeat, do not, rush into this. In SIL's case her DM is an ex-lawyer (property) so her DM has knowledge there.

Do not let your DD buy with the friend, absolutely not.

Why is an 18yr old being saddled with all this extra responsibility.
Medicine is a very intensive degree.

Does DD really want to be a 'landlady' at aged 18?

It sounds like you are all running around like headless chickens.

Your parents are trying to do something nice for DD, but these phone calls and deciding on the hoof - "4 beds, oh no, OK a 2 bed, oh you rent it from us, oh no, actually we'll buy you a 2 bed, ok fine"...., it all sounds a bit manic.

And none of you are really thinking things through.

I think the heart is ruling the head here and it's unfair pressure to be dragging DD in before the 'grown ups' have decided what to do.

Now DDs friend is being dragged in as well to this massive financial undertaking.

What is the plan for the property when your DD has completed her university course? It may suit for a few years if she remains working in London and is happy to continue in shared accommodation but what happens if she wants to move to another area or wants to travel - or she prefers somewhere smaller and her own company (or to be within a relationship).

Would your parents continue with this as a buy to let, or does part of the property remain your DD's?

They have to give the same amount to your DS and be mindful of inheritance tax 7 year rule. Do not brush over this because DS is only 15 and hates London.

Do they have money set aside should they need it to pay for care in the future?

Have they had legal advice on this? This is a hell of a lot of money to pay out without getting some ideas as to the pros/cons of what they're proposing. What about if any work needs to be done on the property in future, who pays for that? And who arranges for the work to be done (will a couple in their late seventies want to be doing with all that in a few years time)? Supposing your daughter hits trouble with one of her tenants - will she/grandparents be able to sort it out? And why a four-bed place? Wouldn't a 3-bed be big enough for your daughter plus two tenants? Or just a one-bed for your daughter?

I wonder if they've properly thought this through, or are just blinkered by the amount of money they have - why ever not spend some of it getting good legal advice first!

Edited to say I agree with the poster above - you all seem to be chasing your own tails, plucking ideas out of the air. I just cannot understand the logic of anyone just taking the idea and running with it - surely the first essential is to get some proper legal advice? Bonkers. And is your daughter mature enough to cope with what COULD go wrong here? She's doing a very demanding degree.

My brother did something similar for my niece.
At the start of her second year of uni he bought her a two bed flat (also London - was maybe £500,000 or so). £200,000 was a mortgage in his name but she was also on it I think? She had a lodger live with her paid rent which covered the mortgage. She then went to travel for a year so my brother used a letting agency to let it out just for the 1 year. She came back, now doing her masters and has a lodger again. Seems to have worked for them really well . His idea was, when her mum passed they kept a fair amount back as nieces inheritance. He thought it better in a house where someone else is effectively paying the mortgage, than going in expensive student accommodation.
Pretty sure when niece is employed and earning enough he will remove himself from the mortgage and it will be hers to do as she pleases with.

This has got disaster written all over it.

she’s too young to have all this responsibility.

Her friends will be unreliable. Boyfriends will stay over. It’ll be a squat before you know it.

it’s too much money to tie up in a place where prices could fall.

the mortgage won’t be agreed in her name or your parents. It’s a bad time to borrow as well.

This is the outcome of a conversation between your parents that needs to consider all angles. It sounds like their minds are made up so you need to tread carefully and make them
accept the risks.

I’d suggest doing nothing for the first year. My DD is also going to uni next year. I want her to live in halls so she can find her feet and make friends without having to commit to who she’ll be living with longer term. I want her to live in an environment with lots of other students to get a feel for what she likes and doesn’t like in a flatmate. The drop out rate is up to around 20% in some courses/universities. How do you know your DD will want to be there for 6 years at this stage? She may want to take a gap year and go travelling or suddenly decide she hates medicine in London and want to go and study English in Bradford instead. She may want to move her friends out and a boyfriend in (who pays the big mortgage then?). I think owning a property for her to live in is placing too many constraints on an 18 year old. If they are desperate to buy a property get them to buy a flat and lease it out via and estate agent but without your DD’s involvement. I also don’t think it’s a good idea for an 18yo to be the landord of a £1m property.

Terrible idea to co own with friend
Abort

This is food for thought. At 18 I would personally prefer to spend at least my first year in student accommodation, meet new people, explore London, have peer support, no worries, no real shopping, cooking, cleaning or maintenance, ucl has great central accommodation and loads of extra circular activities including tennis.

amazing offer - good idea but I would be asking if they could put the flat in both of the childrens names so they own it jointly or if the equivalent will be put in a trust for the sibling.. even then I think fairness would be an issue as money made from flat and also increase in value over time etc.

the other thing I though is that flat could be put in your name; and then you can manage how it all works going forward.

Get some proper financial and wealth planning advice here, would be best for all involved. X

They would have to give DS the same amount so the inheritance tax rule of 7 years counts down equally.

DS is 15 he may change his mind and want to live in London.

We bought a 3 bed flat for this purpose, not in London but centrally in another big university city.
It worked OK, most of the friends who lived there with my kids (x3) paid without any problems but I didn't think it was fair on my kids to have to act as landlord to their friends, so I had to take on that role sort out any issues.
There were also times when it wasn't fully occupied for various reasons, so you do have to factor this in.
Buying a £500k flat, mortgage free and just having one friend at a time is the easy option. Buying a more expensive one and using the rent(s) to cover the loan is a valid idea and would give your daughter a very valuable asset at the end of the period. A lot more hassle though.

I live in a small University city and it's extremely common here for wealthy parents to buy up the houses for their children to live in whilst at University.

There's a planning restriction that's supposed to prevent more than 2 unrelated people living in some of the houses, but they get away with it anyway. I just mention this to be sure there's nothing similar when you're looking at places for her.

She is already in her first year, this wouldn't come into effect until the start of her second year when she is unlikely to get student Accomodation again.

Co-owning is a terrible idea OP. If your daughter's really a 'social butterfly' she'd be happy getting a stranger as a flatmate. Making a new friend. Why the fixation with this girl?
Honestly with @PieAndLattes suggested is the best. One of the adults owns the property - or it's placed in trust - your daughter then rents for a nominal fee and sublets. Use the rent to pay a management company to manage the property.

Don't saddle your daughter with all this at such a young age, when she's on such a gruelling course as well.

Definitely do not let them buy a house for her with a friend. It’s got disaster written all over it. Couples fall apart buying houses never mind two teen girls who have only fairly recently forged a friendship.

It all sounds quite impulsive that off the back of the thread you’ve all just switched completely what you’re planning. Take proper financial advice and research the market. I don’t think you’ll get a two bed property outright in that specific location and I wouldn’t plunge her into significant financial ties with friends to try and make it happen. Just rethink.

If you’re adamant maybe Look at buying somewhere else outright as a step on the ladder and renting it out which would then cover her rent in London? Then she can sell once she’s finished uni and put it towards what she wants, when she knows where/ what she wants.

UCL is near Great Portland St, isn't it?

Latimer Road is West London, but linked to Gt Portland St by tube, Hammersmith & City line I think...

Should easily be able to get a 2 bed flat somewhere around Latimer Road, Westbourne Park, Sheperds Bush, somewhere like that, and it's an easy journey to Great Portland St. Probably only about 20 minutes.

Just a thought, based on the latest posts on here. Would your parents consider putting the money they plan to give your DD and DS in trust for them, to give them when they’re say early twenties - e.g. 25, 26? By that time, they’ll likely both have jobs, and they’ll likely be a bit more settled than at the ages they are now.

I know nothing about putting money in trust - definitely best to have a proper discussion on this with your family and speak to a few financial advisers - but that could be an option to consider. I just brought it up because I think putting valuable things in trust - e.g. money, property - can help to protect it if it’s not needed straightaway.